CGG: Following Agreement with Key Financial Creditors, CGG Begins Legal Process to Implement Balance Sheet Restructuring and Create Sustainable Capital Structure

Following Agreement with Key Financial Creditors,
CGG Begins Legal Process to Implement Balance Sheet Restructuring and Create Sustainable Capital Structure

Commences Sauvegarde proceeding for parent company in France and pre-arranged
Chapter 11 for certain material subsidiaries in the U.S.

Operations continue as usual with sufficient liquidity, high levels of service for customers

Restructuring transactions will result in a group with pro-forma leverage below 2x,
no debt maturing before 2022 and $1 billion liquidity improvement^[1]

Paris, France - June 14, 2017

CGG today announced that following execution of legally binding agreements in support of the terms of the agreement-in-principle with key financial creditors announced on June 2, 2017, it has begun legal processes to implement a comprehensive pre-arranged restructuring, with the opening of a Sauvegarde proceeding in France and Chapter 11 and Chapter 15 filings in the U.S.

CGG will now seek an agreement with the required majorities of creditors. Subject to their support and the plan's approval by the shareholders' general meeting, this agreement will become binding on all creditors following court approval.

Jean-Georges Malcor, CEO of CGG said:

"CGG has accomplished a major step today for its comprehensive financial restructuring plan. The June 2, 2017 agreement-in-principle with our main creditors and DNCA has been signed and the restructuring plan meets our objectives of substantially reducing the debt on our balance sheet while preserving the integrity of the CGG Group.

CGG will continue normal business operations during this process, and the restructuring transactions will not affect relationships with our clients, business partners, vendors or employees. We will maintain our commitment to operational excellence and our customers can be confident that they will continue to receive the best-in-class service and support and innovative solutions they are accustomed to without interruption.

We expect that our financial restructuring can move forward quickly to strengthen our balance sheet and to position the company well for the future."

The Transaction

In conjunction with the legal proceedings in the U.S. and France, CGG and certain of its financial creditors entered into a lock-up agreement on June 13, 2017, pursuant to which the relevant parties committed to support and to take all steps and actions reasonably necessary to implement and consummate the restructuring plan.

The terms of the lock-up agreement are relatively customary and include a requirement for creditors to vote in favor of the Sauvegarde and Chapter 11 plans (subject to receiving appropriate disclosure materials), to provide various waivers, to enter into the required documentation to effect the restructuring and not to sell their debt holdings unless the transferee enters into the lock-up agreement or is already a signatory (and is therefore bound by such terms).

The lock-up agreement has been signed by (i) an ad hoc committee of secured lenders, who hold collectively approximately 53.8% of the aggregate principal amount of the group's secured debt, (ii) an ad hoc committee of senior noteholders, who collectively hold approximately 52.4% of the aggregate principal amount of the Company's senior notes, and (iii) DNCA, which holds 5.5% of the aggregate principal amount of the Company's senior notes and approximately 20.7% of the aggregate principal amount of its convertible bonds. In addition, CGG S.A. entered into a restructuring support agreement with DNCA (in its capacity as shareholder) in connection with its holding of 7.9% of the Company's share capital, pursuant to which DNCA commits to take all steps and actions reasonably necessary as a shareholder to implement the restructuring, including voting in favor of the relevant shareholder resolutions and not selling its shares in CGG during the reorganization process.

Under the terms of the proposed restructuring agreements, upon emergence, approximately $1.95 billion in debt will be eliminated from CGG's balance sheet through full equitization of the principal amount of unsecured debt and the maturity of $0.8 billion of existing secured debt will be extended.

Significantly, as announced on June 2, 2017, the restructuring plan calls for up to $500 million of new money to be raised, split between (i) a $125 million right issue with warrants to be opened to existing shareholders (backstopped by DNCA in cash for $80 million, and potentially other significant shareholders in cash or senior noteholders by way of set-off) and (ii) a $375 million issue of new second lien senior notes with penny warrants to be provided by eligible unsecured senior noteholders under the terms of a Private Placement Agreement (PPA). The PPA provides that the second lien bond offering will be fully backstopped by the ad hoc committee of senior noteholders. Together, these significant transactions will enable CGG to implement the final phase of management's strategic business transformation plan.

The key terms of the restructuring plan are in line with those announced on June 2, 2017 with the following changes or precisions (other than minor or technical issues):

• the $125 million right issue with warrants will be backstopped by DNCA up to USD 80 million (instead of $70 million under the 2 June agreement in principle);
• the $375 million issue of new second lien senior notes with penny warrants will comprise a Euro tranche of up to USD 100 million;
• the penny warrants (as further detailed in the Appendix) will allow to subscribe new shares at a price of €0.01 per new share^[2];
• the penny warrants granted to the ad hoc committee of senior noteholders as global coordination fee will allow to subscribe for a maximum of 1% of the share capital (instead of a fixed 1% of the share capital under the 2 June agreement in principle);
• governance: the structure and composition of the Company's board after completion of the financial restructuring shall (i) be determined in consultation with DNCA and the members of the ad hoc committee of senior note holders who will have become and remain shareholders of the Company and (ii) comply with the AFEP-MEDEF Code and be implemented as soon as practicable, but in any case no longer than three months after completion of the restructuring;
• with respect to the bonds allocated to the secured lenders, any prepayment premium due following an acceleration will be capped at 10%.
• the exchange rate used for the equitization of the convertible bonds and the high yield bonds as well as for the rights issue and the warrants 1 allocation is the Reuters/USD exchange rate applicable as at midday (CET) on June 14 (1 EUR = 1.1206 USD).

The implementation of the restructuring plan is subject to various customary conditions including obtaining the required level of support from creditors in the French Sauvegarde, as well as in the U.S. Chapter 11 cases and the approval of the necessary resolutions by the shareholders' meeting of the Company. The two shareholders holding more than 5% of the Company's share capital other than DNCA, namely Bpifrance Participations and AMS Energie did not participate in the most recent restructuring plan negotiations.

Further details about the agreement signed with the parties are included in the Appendix.

CGG Commences Sauvegarde Proceedings (procédure de sauvegarde) in France

On June 14, 2017, the Paris Commercial Court (Tribunal de commerce de Paris) issued a judgement opening safeguard proceedings (procédure de sauvegarde) in respect of CGG SA, the group parent company.

As part of this process, the Court appointed SELARL FHB, in the name of Helene Bourbouloux, former mandataire ad hoc, as judicial administrator of CGG SA, as well as SELAFA MJA, in the name of Lucile Jouve, as creditors' representative.

CGG S.A also filed a petition under chapter 15 of the U.S. Bankruptcy Code with the Bankruptcy Court of the Southern District of New York, seeking recognition in the U.S. of the Sauvegarde as a foreign main proceeding.

In accordance with the AMF General Regulation, the Company's board of directors appointed  Ledouble SAS as an independent expert to issue a report on the financial restructuring.

Fourteen CGG subsidiaries file voluntary petitions for reorganization under Chapter 11 in the U.S.

Because (i) the US RCF and the Term Loan B (together, $0.5bn) were borrowed by a U.S. subsidiary of the Group and (ii) certain material US and non-U.S. subsidiaries are obligors and guarantors under the US RCF, the French RCF, the Term Loan B and the circa $1.5bn in aggregate principal amount of senior notes issued by CGG SA., Chapter 11 cases are required to implement the pre-arranged restructuring.

On June 14, 2017, fourteen direct and indirect subsidiaries (U.S. and non-U.S.), filed voluntary petitions for reorganization under chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court of the Southern District of New York. These entities, which are borrowers or guarantors of group debt:

• accounted for c.$528 million of the group's revenue for the year 2016, before group eliminations (on the basis of preparation used in note 32 to CGG's 2016 annual report on Form 20-F);
• contributed 26% (c.$311 million) and 26% (c.$85 million) of the group's consolidated revenue and EBITDA before Non-Recurring Charges (NRC), respectively for the year 2016; and
• taking also into account the contribution of their direct and indirect subsidiaries (which are assets embedded in the Chapter 11 scope), contributed 56% (c.$670 million) and 65% (c.$212 million), respectively, of the group's consolidated revenue and EBITDA before NRC for the year 2016.

Preliminary Timetable

The various agreements signed June 13, 2017 contemplate implementation of the restructuring plan through a series of steps, the targeted implementation dates of which are:

• Commitment period for the private placement of second lien high yield bond to be initiated in July
• Creditors committee votes on draft Sauvegarde plan tentatively by end of July
• Company shareholders' meeting by end of October
• U.S. Bankruptcy Court confirmation of the chapter 11 plan and French court sanction of the Sauvegarde plan in November
• Assuming the applicable conditions are satisfied or waived, restructuring plan is expected to be implemented by the end of February 2018.

Operations continue as usual

CGG fully expects that normal day-to-day operations will continue during the French Sauvegarde and the U.S. chapter 11 and chapter 15 processes. The Company intends to make timely payment to vendors in the normal course for all goods and services provided after June 14. The U.S. debtors will promptly seek court approval to continue all employee compensation, health and welfare benefits and expects that the Court will approve its request to do so. 

A "procédure de sauvegarde" is a French judicial procedure to facilitate a company's restructuring while ensuring the continuation of its operations and the protection of its business, the safeguarding of jobs and the discharge of its liabilities. This process is reserved for companies with financial difficulties that can demonstrate they are cash-flow solvent. It will not affect management's ability to operate the business in the ordinary course.

The relevant Group entities have filed customary "First Day Motions" with the U.S. Bankruptcy Court, which, if granted, will help ensure a smooth transition to chapter 11 without disruption and will minimize the filing's impact on employees, customers, vendors, and business partners. The motions are expected to be addressed promptly by the Court.  

Advisers and Resources

CGG's legal advisors are Linklaters LLP and Weil Gotshal & Manges (Paris) LLP for the Sauvegarde and chapter 15 case, and Paul, Weiss, Rifkind, Wharton & Garrison LLP for the chapter 11 cases. The company's financial advisors are Lazard and Morgan Stanley, and its restructuring advisor is Alix Partners, LLP.

Information about CGG's restructuring is available at http://restructuration.cgg.com. Court filings and claims information are available at www.cggcaseinfo.com. Information about the restructuring for vendors is also available toll-free at +1-844-721-3891, or +1-347-338-6512 for callers from outside the U.S. and Canada. 

Forward-Looking Statements

This release (including its appendix) may contain forward-looking statements, including, without limitation, statements about the Company's plans, strategies and prospects. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, the Company's actual results may differ materially from those that were expected. The Company based these forward-looking statements on its current assumptions, expectations and projections about future events. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it is very difficult to predict the impact of known factors and it is impossible for us to anticipate all factors that could affect our proposed results. All forward-looking statements are based upon information available to the Company as of the date of this release. Important factors that could cause actual results to differ materially from management's expectations include, but are not limited to, the ability to confirm and consummate a plan of reorganization in accordance with the terms of the lock-up agreement and the restructuring support agreement; risks attendant to the bankruptcy process, including the effects thereof on the Company's business and on the interests of various constituents, the length of time that the Company might be required to operate in bankruptcy and the continued availability of operating capital during the pendency of such proceedings; risks associated with third party motions in any bankruptcy case, which may interfere with the ability to confirm and consummate a plan of reorganization, potential adverse effects on the Company's liquidity or results of operations; increased costs to execute the reorganization, effects on market price of the Company's common stock and on the Company's ability to access the capital markets, and the risks set forth in the Company's periodic reports and registration statements filed with the SEC and the AMF. Investors are cautioned not to place undue reliance on such forward-looking statements.

About CGG:

CGG (www.cgg.com) is a fully integrated Geoscience company providing leading geological, geophysical and reservoir capabilities to its broad base of customers primarily from the global oil and gas industry. Through its three complementary businesses of Equipment, Acquisition and Geology, Geophysics & Reservoir (GGR), CGG brings value across all aspects of natural resource exploration and exploitation. CGG employs around 5,600 people around the world, all with a Passion for Geoscience and working together to deliver the best solutions to its customers.

CGG is listed on the Euronext Paris SA (ISIN: 0013181864) and the New York Stock Exchange (in the form of American Depositary Shares. NYSE: CGG).

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